Europe's hottest startup capitals: Stockholm

This article was taken from the September 2011 issue of
Wired magazine. Be the first to read Wired's articles in print
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London's startup scene is booming -- you need only read Wired to
see that. But what are Europe's other hot digital cities -- and
which are the companies and founders to watch? Welcome to Wired's
first annual guide to the continent's rising stars.

STOCKHOLM

Sweden has 'the
most digitally connected economy in the world', and a global
mindset when it comes to developing innovative tech startups.

Four times a year, a hundred or so entrepreneurs and a handful
of venture capitalists meet at a secret location in Stockholm to play
poker. "It's a closed group and only by invitation," says Kristofer
Arwin, the founder of PriceRunner and TestFreaks, who started the
event out of his office four years ago. "We were 20 entrepreneurs.
Now there are about 160 in the network." At the most recent event,
Spotify's chief product officer Gustav Söderström rubbed shoulders
with boo. com founder Enrst Malmsten and Lea Bajc, a hyperactive
venture capitalist. "You become friends with these guys," says
Arwin. "All these people have got to know each other and have
started new businesses, and become investors in other businesses,
pretty much because they got to know each other in these
circumstances."

Arwin's poker night may be more symptom than cause of the
emergence of a proper Stockholm entrepreneurial ecosystem, led by
pioneering ventures such as Kazaa, Skype, MySQL, The
Pirate Bay and Spotify. An analysis
by venture-capital firm Creandum reports that over the past five
years, €2.6 billion (£2.3 billion) has been generated per year from
Nordic tech-company exits, with more than half of this coming from
Sweden alone.

Tight links exist between Swedish startups. Along with Arwin,
Rebtel CEO Andreas Bernström and iZettle cofounder Jacob de Geer;
the CTO of Stardoll used to be a young engineer called Daniel Ek;
and Spotify's own CTO Andreas Ehn left to set up his own business
in Stockholm, but also serves as an advisor to Videoplaza and Ocean
Observations. INSEAD business school ranks Sweden second in its
Global Innovation Index Reports for 2009-2010.

"You have to have a global mindset when building a business,
because the Swedish market is so small," says Pär-Jörgen Pärson, a
partner at Northzone Ventures, which has invested in Spotify, Tobii
and X5 Music. The home market is, however, a good testbed for tech
companies: a report by the World Economic Forum in March found that
Sweden had the most digi- tally connected economy in the world.
"We're a nation of early adopters," says Sorosh Tavakoli, CEO of
Videoplaza.

But it is rare for successful tech companies to remain in
Sweden. Videoplaza, Spotify, Readmill and SoundCloud have all moved
their headquarters to bigger markets, suggesting that setting up a
company is easy, but retaining talent once established is not.
"Entrepreneur founders in Sweden can get rich off their equity in
an exit scenario, but tying employment to options results in
ridiculous taxes for both the employee and the company," says
Matthias Miksche. Niklas Zennström started Skype in Stockholm, but
quickly moved its base to Luxembourg: "The way to incentivise
people in tech companies is stock options," he says. "Swedish law
is unattractive."

Comments

Ehm... "Europe's hottest startup capitals: Sweden"Sweden... a captical? In what country is Stockholm the capital in then?

Martin LeBlanc Eigtved

Aug 18th 2011

Great article, but there´s a spelling error in the headline for Bambuser, it says "Bambuster".

Mikael Zackrisson

Aug 18th 2011

Second highest personal taxation in the world, strict labour laws, highest VAT in the EEA- area (25 per cent), relatively high corporate taxation (28 per cent), relatively efficient public administration but do expect to spend much time on red tape, need for urgent investments in strained infrastructure but with no funds coming, lack of entrepreneur-savvy venture capital, overvalued housing market (on par with Irish bubble) make for high office and storage costs.Wait, isn't Stockholm the hottest startup capital in Europe? Be aware that Stockholm has many smaller companies that are spin offs from larger companies, and that maintain strategic alliances with them. Sweden has as fair share of very small companies and global corporations, but the lowest number of medium sized companies in the OECD. It is a tough business environment, so the names given in the article are really good as they have made it despite the business climate in Stockholm, not because of it. That is why they leave Stockholm when starting to play in the big leagues. Waldemar IngdahlAuthor of the book Cities on the Edge

Waldemar Ingdahl

Aug 18th 2011

In response to Waldemar Ingdal: I think Stockholm deserves to be on this list. We have a long history of innovation and there's no exception today. No place is perfect, you can find negatives in all the cities mentioned in this articles. The foundation of a good startup can be found in abundance Stockholm: highly skilled people.

Joseph M.

Aug 18th 2011

The availability of highly skilled people is a prerequisite, but you can find them in Oeiras, Portugal and Shanghai, China too. But factors such as venture capital, business environment and potential for development must be considered.